Multilateralism and Full Employment

Extract

The problem of multilateral international trade looms large in the present plans for the new world economy. The International Monetary Fund and the International Bank for Reconstruction and Development as well as the agreement underlying the United States loan to the United Kingdom aim at establishing a workable system of multilateral international trade. Roughly speaking, the principle of multilateralism requires that each country should be guided in its purchases in other countries solely by the price and quality of goods without taking into consideration whether the supplying countries are or are not buyers of the produce of the country in question. It will be seen that the operation of such a system in balancing foreign trade may create serious difficulties for those countries which pursue a policy of maintaining full employment. Each country at full employment will require a certain volume of necessary imports. Now it is by no means obvious that it will be able to secure under a multilateral trade system a level of exports which will provide it with a sufficient amount of foreign exchange to pay for the volume of imports required at full employment. The country concerned may thus tend to achieve more security in its foreign trade by concluding a series of bilateral agreements with other countries relating in some way imports from and exports to those countries. Or it may enter together with other countries into a “regional block” expecting, on the basis of the economic characteristics of the participants, to be able to secure within the block a large part of the required imports in exchange for its exports. (The trade within the block would be operated on a multilateral basis, while the exchange proceeds from exports to countries outside the block would be “pooled” and allocated to the member countries of the block according to a certain schedule.)